�Past performance is the best guide to ascertaining standard costs.�

�Past performance is the best guide to ascertaining standard costs.�

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(c) A consultant recently stated: ‘Past performance is the best guide to ascertaining standard costs.’ Analyse this statement in detail and indicate whether or not you agree with it. Yes the Past performance is the best guide for ascertaining standard costs as Historical cost data will be useful for cost estimation only if they are collected and organized in a way that is compatible with future applications. Organizations which are engaged in cost estimation continually should keep a file for their own use. The information must be updated with respect to changes that will inevitably occur. The format of cost data, such as unit costs for various items, should be organized according to the current standard of usage in the organization.historical data can be very useful in forecasting future prices and quantities however historical data must be used with caution and adjusted when necessary for example changes in product design or manufacturing process can
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Unformatted text preview: dramatically change both the amounts and the prices of materials,labour and overheads.For setting a standard time for labor force, we normally take in to account previous experience, past performance records, test run result, work-study etc. The labor rate standard refers to the expected wage rates to be paid for different categories of workers Past wage rates and demand and supply principle may not be a safe guide for determining standard labor rates. The anticipation of expected changes in labor rates will be an essential factor. In case there is an agreement with workers for payment of wages in the coming period, these rates should be used. If a premium or bonus scheme is in operation, then anticipated extra payments should also be included. Where a piece rate system is used, standard cost will be fixed per piece. The object of fixed standard labor time and labor rate is to device maximum efficiency in the use of labor....
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This note was uploaded on 01/05/2012 for the course 101 melissa jo taught by Professor Acc101 during the Spring '11 term at Aarhus Universitet.

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